Definition

1. Noun:
   • The total cost for all units bought (or produced) divided by the number of units: This is a financial and accounting term that calculates the mean cost per individual unit by aggregating all costs and distributing them evenly across the total quantity.

Usage

• Average cost is used to determine the typical expense incurred for each item when costs vary across a batch or production run. It is a key metric in business, economics, and personal finance for assessing efficiency, setting prices, and evaluating profitability.
• It is commonly preceded by determiners like "the," "an," or "our," and often modified by adjectives (e.g., "low," "high," "unit").

Examples

• Noun:
  • The average cost of manufacturing each smartphone has decreased this quarter.
  • To find the average cost, divide your total expenses by the number of items sold.
  • An average cost of $50 per unit is acceptable for our profit margins.

Advanced Usage

• "to calculate the average cost": to perform the arithmetic operation to find the mean cost per unit.
  • The first step in our analysis is to calculate the average cost.
• "on average cost": referring to a basis or perspective of typical expense.
  • We are competitive on average cost, but not on initial price.

Variants and Related Words

• Unit Cost (noun): The cost incurred to produce, store, and sell one unit of a product. While similar, "unit cost" can be a specific or actual cost, whereas "average cost" explicitly implies a calculated mean.
• Mean Cost (noun): A less common synonym for average cost, using the statistical term "mean."
• Total Cost (noun): The sum of all costs, which is the numerator in the average cost calculation.

Synonyms

• Mean cost: The statistical average of costs.
• Per-unit cost: Cost attributed to each individual unit.

Related Phrases

• Average cost pricing: A pricing strategy where the price is set equal to the calculated average cost of a product.
  • The firm uses average cost pricing to ensure it covers all expenses.
• Average cost method: An inventory valuation method that assigns a cost to items based on the average cost of all similar goods available during a period.
  • We value our inventory using the average cost method.

Noun

1. total cost for all units bought (or produced) divided by the number of units